Edited version of your private ruling

Authorisation Number: 1012510707130

Ruling

Subject: GST and donations

Question 1

Are payments received by you from your members (in the circumstances described) subject to goods and services tax (GST)?

Answer

No.

Relevant facts and circumstances

· You are registered for GST.

· You are endorsed as a charity for GST purposes.

· Your main charitable purpose is the advancement of social and community welfare.

· You do not have any employees that are paid wages however you have volunteers that assist you with cleaning.

· Some members of your group voluntarily give monies to you with the expectation that this may help you in paying the volunteer.

· You use these monies to give approximately $50 to the volunteer each week.

· You receive a 'statement by Supplier' form from the volunteer as evidence for not having to quote an ABN.

· These members do not receive any material benefit in return for the giving of the monies to you.

· The monies given are not a set amount as a member gives what they feel is appropriate and there is no contractual obligation associated with the giving of the monies.

· These monies are placed into a sub-account of the charity.

Relevant legislative provisions

A New Tax System (Goods and Services Tax) Act 1999 Section 7-1

A New Tax System (Goods and Services Tax) Act 1999 Section 9-5

A New Tax System (Goods and Services Tax) Act 1999 Sub-section 9-15(1)

A New Tax System (Goods and Services Tax) Act 1999 Sub-section 9-17(2)

Reasons for decision

Section 7-1 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), provides that you are liable for GST in respect of any taxable supply that you make.

Under section 9-5 of the GST Act, an entity makes a taxable supply if:

· it makes a supply for consideration

· the supply is in the course or furtherance of an enterprise that it carries on

· the supply is connected with Australia, and

· the entity is registered or required to be registered for GST.

However, the supply is not a taxable supply to the extent that it is GST-free or input taxed.

Gifts to non-profit bodies are not consideration

What constitutes a 'gift' for GST and income tax purposes have been set out in two public rulings - Goods and Services Tax Ruling GSTR 2012/2 (Goods and services tax: financial assistance payments) and Taxation Ruling TR 2005/13 (Income Tax: tax deductible gifts - what is a gift). The guidelines set out in TR 2005/13 are also applicable for GST.

Both rulings state that amongst other things, a gift ordinarily proceeds from a detached and disinterested generosity of the donor. Also, the giver must not receive a benefit or an advantage of a material nature by way of return. It is a question of fact in each case whether any benefit or advantage is considered material.

Subsection 9-15(1) of the GST Act provides that the term consideration includes any payment, or any act or forbearance, in connection with, in response to or for the inducement of a supply of anything. However, subsection 9-17(2) of the GST Act specifically excludes a gift made to a non-profit body from being the provision of consideration. 'Gift' and 'non-profit body' are the essential terms in this subsection. It follows that if a payment received by a non-profit body is a gift, there will not be a taxable supply, unless there is another supply made by the non-profit body for the payment (as consideration for the other supply).

GSTR 2012/2 provides guidance on what is a gift. Paragraphs 69 to 71 and 110 to 111 state:

69. Gifts to a non-profit body are not consideration for a supply.

70. The term 'gift' is not defined in the law and therefore takes its ordinary meaning having regard to the context in which it appears. It is considered that a 'gift' has the following characteristics and features:

· there is a transfer of a beneficial interest in property;

· the transfer is made voluntarily;

· the transfer arises by way of benefaction; and

· no material benefit or advantage is received by the giver (payer) by way of return.

71. In applying these criteria, the courts have recognised that the criteria may not be absolute and may involve a matter of degree.

110. The term 'gift' is not defined in the GST Act and so takes on its ordinary meaning in the context in which it appears. In Federal Commissioner of Taxation v. McPhail (McPhail), in an income tax context, Owen J said that the term 'gift' is 'used in the sense in which it is understood in ordinary parlance'. The Commissioner considers that for GST purposes, income tax cases relating to gifts provide relevant guidance. The income tax legislation similarly gives special treatment to gifts to some charitable and non-profit bodies.

111. As explained in Taxation Ruling TR 2005/13 Income tax: tax deductible gifts - what is a gift, the courts have described a gift, as ordinarily understood, as having the following characteristics and features:

· there is a transfer of a beneficial interest in property;

· the transfer is made voluntarily;

· the transfer arises by way of benefaction; and

· no material benefit or advantage is received by the giver (payer) by way of return.

In summary, a payment is a gift where:

· the payer makes the payment voluntarily

· no material benefit flows to the payer as a result of the payment, and

· the payment is made essentially out of benefaction.

Therefore as the donations by your members are made on a voluntary basis and satisfy the above conditions, they will be considered to be gifts and will not be subject to GST.

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